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Thursday, May 7, 2015

Three California Men and Minnesota Corporation Indicted in Nationwide Prescription Drug Diversion Scheme

Three California men and a Minnesota company were charged in an indictment today in the Southern District of Ohio for their roles in a massive prescription drug diversion scheme. 

The indictment alleges that David Jess Miller, 50, of Santa Ana, California; Artur Stepanyan, 38, and Mihran Stepanyan, 29, both of Encino, California, and Minnesota Independent Cooperative Inc. (MIC) engaged in a conspiracy to sell prescription drugs from illegal, unlicensed sources to wholesalers and pharmacies throughout the United States.  The 12-count indictment charges the defendants with conspiracy to commit mail and wire fraud, multiple counts of mail fraud, and conspiracy to distribute prescription drugs without a license and to make false statements.    

Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division, U.S. Attorney Carter M. Stewart of the Southern District of Ohio, Director George M. Karavetsos of the U.S. Food and Drug Administration (FDA)’s Office of Criminal Investigations and Assistant Inspector in Charge Christopher White of the U.S. Postal Inspection Service (USPIS) announced the charges. 

According to the indictment, from 2007 through April 2014, David Miller and his company, MIC, of Eagan, Minnesota, purchased prescription drugs from a network of illegal and unlicensed sources in New York, Florida and California.  Artur Stepanyan and Mihran Stepanyan, worked together to sell drugs from illegal sources to Miller and MIC.  Artur and Mihran Stepanyan, using a variety of company names, including Panda Capital Group, Red Rock Capital Group, Trans Atlantic Capital Group and GC National Wholesale, were Miller’s largest source of illegal drugs.  During the course of the conspiracy, Miller and MIC paid the Stepanyans approximately $160 million for these prescription drugs. 

“American consumers should be able to rely on the prescription drug supply chain,” said Principal Deputy Assistant Attorney General Mizer.  “Prescription drug diversion schemes like the one charged in this indictment undermine that supply chain and increase the risk that counterfeit, adulterated, misbranded, sub-potent or expired drugs will be sold to patients and consumers.” 

To hide the true, illegal sources of their prescription drugs, David Miller and MIC falsified so-called drug pedigree documents.  Pedigrees are documents required by law that show the source of drugs.  For most of the conspiracy, the fraudulent pedigrees falsely listed B&Y Wholesale, a company located in Puerto Rico and co-owned by co-conspirator Yusef Yassin Gomez (Yassin) as the source of the drugs.  The pedigree documents also falsely stated that Yassin’s company was an authorized distributor of the drugs.  On Feb. 19, 2014, Yassin pleaded guilty in U.S. District Court for the Southern District of Ohio to conspiracy to engage in the wholesale distribution of prescription drugs without a wholesale license.  In connection with his guilty plea, Yassin admitted the he agreed to allow Miller and MIC to use his company’s name on pedigree documents to hide the true drug sources.  In exchange, Miller and MIC paid Yassin a commission on all of the drug sales. 

 “Once a prescription drug is diverted outside of the regulated distribution channels, it becomes difficult, if not impossible, for regulators, law enforcement and end-users to know whether the prescription drug package actually contains the correct drug or the correct dose,” said U.S. Attorney Stewart.  “We will aggressively prosecute individuals and companies that ignore the law and sell illegally diverted prescription drugs to pharmacies, and ultimately, to American consumers.

“We are committed to protecting the integrity of the pharmaceutical supply chain, especially as criminals go to more extreme measures to subvert it,” said FDA’s Office of Criminal Investigations Director Karavetsos. “We will continue to pursue these criminals and work to bring them to justice.”

“The Postal Inspection Service is proud to partner with the FDA Office of Criminal Investigations to bring to bear our mail fraud expertise to help the fight against drug diversion,” said USPIS Assistant Inspector in Charge White.

Throughout the course of the conspiracy charged in the indictment, using these fraudulent pedigree documents, Miller and MIC sold approximately $393 million worth of prescription drugs to wholesalers and retail pharmacies throughout the United States, including to multiple customers in the Southern District of Ohio. 

In addition to Yassin, two of Miller’s other illegal drug suppliers, Peter Kats and Joseph Dallal, previously pleaded guilty to conspiracy to commit mail and wire fraud for their sales of illegally-diverted prescription drugs to Miller and MIC. 

This matter is being investigated by the FDA and USPIS.  Assistant U.S. Attorneys Anne L. Porter and Christy Muncy of the Southern District of Ohio and Trial Attorney John W. Burke of the Civil Division’s Consumer Protection Branch are prosecuting this case.

David Miller, Artur Stepanyan, and Mihran Stepanyan were charged amongst 30 other individuals in the Northern District of California in a separate indictment on charges including federal Racketeer Influenced and Corrupt Organizations (RICO) Act; conspiracy to commit identity theft; conspiracy to commit access device fraud; conspiracy to commit mail, wire, and bank fraud; money laundering conspiracy; and conspiracy to distribute prescription drugs without a wholesale license.

The charges in the indictment are merely allegations, and do not constitute proof of guilt.  Every defendant is presumed to be innocent unless and until proven guilty.

Consumer Protection
Updated May 7, 2015